Estonia's Port of Tallinn will see slightly faster growth in tonnage and box throughput in 2015 compared to 2014. Tonnage in 2014 grew by only 0.3%, but this was the first expansion after three consecutive years of falling volumes, reflecting the diversion of Russian transit traffic to the rival port of Ust-Luga. Despite continuing concerns over trade with Russia, we believe both bulk tonnage and box traffic is now back on a sustainable growth path, reflecting a moderate but continuing domestic economic recovery and diversification of trade.

Our overall view of the Estonian economy this year is upbeat, based on the hypothesis that strong real incomes, low inflation, and low unemployment will continue to support a revival in domestic consumption that will drive the economy forward. The foreign trade picture is mixed with difficulties experienced by two important trade partners - Russia and Finland - having a negative effect. This is being offset however by resilient demand for Estonian exports (particularly electronic good production and wooden products) from Scandinavian countries - Sweden, Norway and Denmark. This has been a factor in lifting first-quarter Estonian industrial production. Still, bearing in mind the external headwinds, we are now predicting 2015 GDP growth of 2.2% (down on our previous estimate of 2.8% but still higher than the 2.1% recorded in 2014).

Headline Industry Data

The Port of Tallinn's gross tonnage is set to grow by 1.2%, to 28.7mn tonnes in 2015, following estimated growth of 0.3% in 2014.

Box traffic at Tallinn to grow by 3.0% in 2015, to 268,102 twenty-foot equivalent units (TEUs) in 2015 - slightly up on the 2.6% growth estimated for 2014.

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Coverage

BMI Industry View

Summary of BMI's key industry forecasts, views and trend analysis covering shipping, major investments and projects and significant multinational and national company developments.

SWOT Analysis

SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis of the state's shipping sector, which carefully evaluates the short- and medium-term issues facing the industry.

Market Overview

Analysis of the capacity, terminals and planned development of the major ports in each country, including data on throughput and total tonnage.

Industry Forecast Scenario

Historic data series (2008-2012) and forecasts to end-2018 for all key industry and macroeconomic indicators (see list below), supported by explicit assumptions, plus analysis of key downside risks to the main forecast, including:

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Port Of Tallinn To See Moderate Growth In 2015

Estonia's Port of Tallinn will see slightly faster growth in tonnage and box throughput in 2015 compared to 2014. Tonnage in 2014 grew by only 0.3%, but this was the first expansion after three consecutive years of falling volumes, reflecting the diversion of Russian transit traffic to the rival port of Ust-Luga. Despite continuing concerns over trade with Russia, we believe both bulk tonnage and box traffic is now back on a sustainable growth path, reflecting a moderate but continuing domestic economic recovery and diversification of trade.

Our overall view of the Estonian economy this year is upbeat, based on the hypothesis that strong real incomes, low inflation, and low unemployment will continue to support a revival in domestic consumption that will drive the economy forward. The foreign trade picture is mixed with difficulties experienced by two important trade partners - Russia and Finland - having a negative effect. This is being offset however by resilient demand for Estonian exports (particularly electronic good production and wooden products) from Scandinavian countries - Sweden, Norway and Denmark. This has been a factor in lifting first-quarter Estonian industrial production. Still, bearing in mind the external headwinds, we are now predicting 2015 GDP growth of 2.2% (down on our previous estimate of 2.8% but still higher than the 2.1% recorded in 2014).

Headline Industry Data

The Port of Tallinn's gross tonnage is set to grow by 1.2%, to 28.7mn tonnes in 2015, following estimated growth of 0.3% in 2014.

Box traffic at Tallinn to grow by 3.0% in 2015, to 268,102 twenty-foot equivalent units (TEUs) in 2015 - slightly up on the 2.6% growth estimated for 2014.

Import growth will lead with 3.2% expansion, ahead of exports, which will be up by 2.0%.

Key Industry Trends

Domestic Maritime Tonnage Falls: According to information released by Statistics Estonia (SE) at the end of March, total domestic freight volume fell 5% year-on-year in tonnes, and played a significant role holding back faster economic growth. The agency said road and air transport had increased their share of total tonnage at the expense of rail and sea freight. Rail freight was down by almost 20% to 36mn tonnes, while (domestic) maritime freight was said to have fallen by 17% to 1.6mn tonnes. Transport, which is seen as one of main drivers of Estonian economic growth alongside energy and exports, suffered a considerable downturn in the first half of 2014. The slowdown of exports to Russia, which had earlier started redirecting cargo traffic to its own Baltic ports, did most to drive the drop. The trade sanctions imposed by the EU and counter-sanctions from the Russian government also contributed. SE notes that 'in 2014, the decrease in value added in transportation and storage slowed the Estonian economy down the most.'

Tallinn Pursues Twin Port Programme With Helsinki: The ports of Tallinn and Helsinki said in March that they would continue cooperating to develop a maritime link designed to improve and streamline port infrastructure and green line (direct) operations between the two facilities. They said they were jointly applying for EU funding to support their programme, known as Twin-Port. The ports are investing EUR100mn in infrastructure in order to achieve additional capacity and improve the flow of the densely operated Helsinki-Tallinn line, which serves 8.2mn passengers and carries 3.1mn tons of cargo annually. Ain Kaljurand, CEO of Port of Tallinn, said the Estonian side's contribution to the project is focused on the development of a new environmentally friendly liquefied natural gas vessel with efficiency related solutions to make the route a truly Green Shipping Line. Other components of the project include improved traffic solutions at terminals A, B and D in Tallinn Old City Harbour, and a study of ro-ro (roll on-roll off) scenarios at both facilities.

Baltic Box Traffic On the Up? Interest in direct calls to Baltic ports is increasing, with countries in the region expected to grow faster than the eurozone average, despite concerns over their neighbour Russia, said Hellenic Shipping News in May. Referring to container growth, the publication said 'While some dip is expected due to the Russian crisis, growth is expected to remain relatively bullish spurred on by the progressive integration of key Baltic nations with the European Union, major infrastructure developments, growing foreign direct investment, improving educational standards, rising consumer demand and a flowering entrepreneurial spirit.' Hellenic Shipping News stressed the importance of the trend by big liner companies such as Maersk and MSC to seek out hub ports able to cater to the larger 10,000TEUs-plus box ships, with good availability of weekly feeder services.

Key Risks To Outlook

The main downside risks to Estonia's shipping and port sector still come from relations with Russia and lingering worries over the economic health of the eurozone. The latter looms larger than the former at present: although diplomatic tensions with Russia have eased, the poor state of the neighbouring giant's economy is an important factor. A large proportion of Estonian exports to Russia are machinery or electrical goods, and given our already downbeat view on Russian consumer and business demand for imports, any intensification of tension with the West prompted by the situation in the Ukraine could presage an even steeper decline in export volumes to Russia than already recorded.